India seeks Canadian expertise on tax reform

Toronto: To prepare a road map for the introduction of Goods and Services Tax (GST) in India, a delegation of the Empowered Committee of State Finance Ministers was here to study the Canadian model and learn from its experience the complexity of inter-state trade taxation.

The delegation led by Sushil Kumar Modi, Deputy Chief Minister of eastern Indian state of Bihar and Chairman of the Committee, held discussions with top Canadian politicians including Ontario Premier Dalton McGuinty, tax experts, legal luminaries and businesses to share their experiences.

The Canadian experience of combined tax, collected by a federal agency, allowed businesses to reduce costs and remain competitive with businesses in provinces that had already harmonized sales taxes, the tax experts told the Indian delegation at a round table conference organised by the Indo Canada Chamber of Commerce (ICCC) last week.

Experts told the delegation comprising seven ministers representing Delhi, Haryana, Punjab, Jammu and Kashmir, Madhya Pradesh, Mizoram, Orissa, and senior officers from 14 Indian states that it took Canada two decades to develop a model that allowed fair distribution of revenue between Centre and States and refund of tax to the tax payers based upon their income.

Modi said that India would like to learn from the Canadian experience. The Canadian model permits every province to strike a deal with the Centre to merge State sales tax with the Central Sales Tax.

At the same time, did not curtail the Constitutional authority of the States that have right to grant exemptions on businesses.

“India faced challenges of fiscal deficit, current account deficit and inflation but fundamental of its economy are very strong,” Modi who recently visited China said, and added China also faced similar challenges. Modi said that a Constitutional Amendment Bill for GST was pending before the Indian Parliament.

However, there were still several issues like GST rate structure, actual GST rates, threshold exemptions where a final view was yet to be taken. Canadian experience could help us in taking informed decisions, he added.

Speaking on the occasion, Preeti Saran, Consul General of India, said that the Empowered Committee that was constituted in 2000 for introducing reforms in the State level taxes, would visit Ottawa and Vancouver.

She said that the delegation had discussions with the government of Canada, Ontario government and other stakeholders including ICCC. It would contribute not just to a better understanding of taxation system, but was yet another example of how India could learn from Canada in a mutually beneficial relationship.

ICCC President Naval Bajaj said the ICCC was committed in building bridges between India and Canada.